Retirement strategies for 30-year-olds

WallStreet Journal

It’s never too early to start planning for retirement. With this in mind, we asked The Experts: What retirement money tip do you wish you’d given yourself when you were 30?

Investment tips nobody told me

William Reichenstein: If you have not already begun saving, begin saving now! Adhere to the adage: Pay yourself first! Moreover, every time you get a salary increase, have some of that increase go toward more savings until you have maxed out your eligible contribution to your 401(k) or other savings vehicle. If the Roth IRA, Roth 401(k), and Roth 403(b) were available when I was 30, I would have encouraged a careful consideration between saving in say the 401(k) or the Roth 401(k).

Furthermore, I wish someone would have told me to maintain a heavy stock allocation — probably at least 90% until my early 40s — with perhaps 30% of the stock portion in international stocks.

Film clip: 'Godzilla'

For a typical 64-year-old planning to retire in one year, target retirement date funds suggest a stock allocation of at least 50%. Finally, I wish someone would have encouraged me to pay careful attention to mutual-fund expense ratios. If available then, I should have invested in low-cost index funds.

William Bernstein: The riskiness of stocks is dependent on where in an investor’s life cycle they are; they’re the least risky early on, since large price falls are actually beneficial to those with ongoing savings, and the most risky in retirement, when the losses can’t be made up with further saving. I wish I had realized this when I was young.

William Bernstein is a neurologist and co-founder of Efficient Frontier Advisors, an investment management firm.

Look before you leap into these investments

Bud Hebeler: I wish I had known about the bookkeeping burdens for investments like real estate and partnerships as well as the difficulties of getting out of the investments. I’ve had more than my share of these difficulties, but the worst I’ve seen is an elderly friend who tried to sell a real-estate partnership so a survivor would not have the same obligations. He couldn’t find a buyer, so he went to several charities. Only one of these would take ownership — only with the condition that it was appraised. Appraisal of a real-estate partnership with several properties in several states is very costly. So he effectively had to pay to give it away, since the charitable deduction on his tax return was less than the cost of the appraisal.

Henry “Bud” Hebeler was president of the aerospace division of Boeing Co. He has served on the board of MIT’s Sloan School and currently focuses on the dissemination of free, sound financial planning on Analyzenow.com. He also is a contributor to MarketWatch’s Retirementor section.

The one word I’d like to tell my younger self

Maddy Dychtwald: How many of you remember seeing the movie “The Graduate” starring Dustin Hoffman? It not only made him a huge star, playing Benjamin Braddock, a recent college graduate who wasn’t sure what to do with his future, but it introduced a few memorable lines, including, with some paraphrasing: “One word: plastics. The future is in plastics.”

Those might have been wise words back in the day, but not so much anymore. If I were to provide my younger self with the secret to a successful future, it would be “Longevity. Be prepared to live a long life.” And one of the best strategies to living a long life successfully can be summed up in one word: “Compounding.” In order to live a long life, it’s going to take money. A lot of money. The secret weapon to getting there is to take advantage of compounding.

Think about it. We’re the first humans who will live to 80, 90, and even 100. If we knew this in advance, we’d quickly realize that this requires some long-term planning. We’ll need to figure out how to maintain our health and vitality, how to reinvent ourselves at work and at play, how to get back up when we get knocked down, and how to pay for all this and more.

Money isn’t everything, but it can oil the wheel so we have more opportunities and choices in how we live our long life. And so, here’s what I would say to my 30-year-old self:

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